Hose v. Wis Holdings Corp. et al

Exhibit 1 to Decl. of Konecky

Southern District of California, casd-3:2014-cv-02869

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6 EXHIBIT 1 To Declaration of Joshua G. Konecky 6 SETTLEMENT AND RELEASE AGREEMENT This Settlement and Release Agreement (the "Settlement Agreement") is made and entered into as of the last day set forth on the signature page by and between Washington Inventory Service, Inc. d/b/a WIS International ("WIS"), SIW Holding Company, Inc. f/k/a/ WIS Holding Company, Inc., WIS Holdings Corp., Western Inventory Service, Inc., Washington Inventory Service, WIS International, Inc., Labor Support International, Inc., Service Support International, Inc. (collectively the "Debtors"), Retail Services WIS Corporation ("RSWIS"), Centre Lane Partners LLC, CLP Retail Services Holdings LLC, Centre Lane Partners IV L.P., and CLP Retail Services Co-Investment, LLC (collectively with RSWIS, the "Centre Lane Parties") on the one hand and Monica Arispe Edwards, on her own behalf and as a PAGA representative plaintiff as defined in this Settlement Agreement ("Arispe"), Richard Hose, on his own and as a representative plaintiff on behalf of all others similarly situated as defined in this Settlement Agreement ("Hose") on the other hand, and The Official Committee of Unsecured Creditors for SIW Holding Company, Inc. (the "Committee") (individually, a "Party," and collectively, the "Parties"), for the purpose of resolving by compromise and settlement all claims, controversies, alleged liabilities, and disputes between them as described in this Settlement Agreement. RECITALS This Settlement Agreement is entered into with reference to the following facts: WHEREAS, the Debtors are all debtors in a jointly administered Chapter 11 bankruptcy pending in the United States Bankruptcy Court of the District of Delaware (Case No. 18-11579 (KBO)) (the "Bankruptcy Matter"); WHEREAS, the Committee has been established in the Bankruptcy Matter to represent the interest of the Debtors' unsecured creditors including Hose and Arispe; WHEREAS, the Committee, including Hose and Arispe, the Debtors, RSWIS, and Centre Lane Partners LLC have negotiated this Settlement Agreement as a settlement of claims that facilitates a proposed joint plan of liquidation in the Bankruptcy Matter (the "Plan"); 1 182957\00001\103820881.v4 6 WHEREAS, the principal claims against the Debtors' estates consist of, but are not limited to, the following: 1. The RSWIS Claim: a. RSWIS has asserted claims against each of the Debtors in the amount of $123,770,583.97. On December 20, 2012, the Debtors entered into a Second Lien Credit Agreement (the "Second Lien Credit Agreement") and certain other related loan documents (the "Loan Documents"). The Second Lien Credit Agreement provides for a term loan with an initial principal amount of $100,000,000.00 that matured on June 20, 2019. Prepetition, the Debtors defaulted under that certain First Lien Credit Agreement, dated December 20, 2012 (the "First Lien Credit Agreement"). The Debtors and the First Lien Agent (as defined in the First Lien Credit Agreement) agreed to sell the Debtors' assets to RSWIS, pursuant to that Foreclosure Sale and Asset Purchase Agreement, dated June 8, 2017 (the "RSWIS Sale"). Substantially contemporaneously with the sale, the loans extended under the Second Lien Credit Agreement were assigned to RSWIS. RSWIS contends that, as of the Petition Date, the Debtors owe RSWIS the liquidated sum of not less than $123,770,583.97 under the Loan Documents, representing $100,000,000.00 of principal and $23,770,583.97 of interest and fees. 2. The Rabbi Trust Claims: a. Prior to the RSWIS Sale, the Debtors sponsored a trust (the "Rabbi Trust") to provide for non-qualified benefit obligations to certain of its senior employees (the "Rabbi Trust Claimants"). Under IRS rules, however, once the Debtors became insolvent, the assets of the Rabbi Trust became available to satisfy the claims of the Debtors' creditors. Certain Rabbi Trust Claimants have asserted unsecured priority claims under 11 U.S.C. § 507(a)(4) and unsecured non-priority claims against the Debtors' estates. 2 182957\00001\103820881.v4 6 b. On January 3, 2019, the Bankruptcy Court in the Bankruptcy Matter entered its Order Granting Debtors' Motion for Entry of an Order Approving a Stipulation for Turnover of Rabbi Trust Assets to the Debtors (the "Rabbi Trust Order") [D.I. 153]. Under the Rabbi Trust Order, Delaware Charter Guarantee & Trust Company d/b/a Principal Trust Company turned over to the Debtors approximately $2 million in assets held in the Rabbi Trust. c. Following RSWIS' acquisition of substantially all of the Debtors' assets, RSWIS entered into individual agreements with Rabbi Trust Claimants who were employed by RSWIS after the Sale. Such claimants who meets all the qualifications of their respective arrangements with RSWIS and applicable law can expect to receive an amount equal to the amount that was attributable to such employee in the Rabbi Trust. 3. The Hose Claims: a. Hose, on his own behalf and on behalf of all others similarly situated (the "Hose Plaintiffs"), is plaintiff, and debtor WIS and non-debtors RSWIS and Centre Lane are defendants, in an action pending in the United States District Court for the Southern District of California (Case No. 3:14-cv-02869-WQH-AGS) (the "Hose Lawsuit"). In the Hose Lawsuit, the Hose Plaintiffs, who are former and current employees of WIS and RSWIS assert wage claims against WIS and the Centre Lane Parties for violations of the Fair Labor Standards Act and under common law. b. Under the Order (i) Establishing Bar Dates for Filing Proofs of Claim, (ii) Approving Proof of Claim Form, Bar Date Notices, and Mailing and Publication Procedures and (iii) Providing Certain Supplemental Relief [D.I. 78] (the "Bar Date Order") entered by the Bankruptcy Court in the Bankruptcy Matter, the Hose Plaintiffs were authorized to file a class claim through their counsel. 3 182957\00001\103820881.v4 6 c. The Hose Plaintiffs assert an unsecured claim against the Debtors' estates in the amount of $66,568,868. Of that amount, $4,988,508.01 is asserted as a priority unsecured claim under 11 U.S.C. § 507(a)(4). 4. The Arispe Claims: a. Arispe, on her own behalf and on behalf of all others similarly situated, claims to be an aggrieved employee pursuant to the California Private Attorney Generals Act ("PAGA"), and WIS and RSWIS are defendants, in an action (the "Arispe Lawsuit") pending in the Superior Court of the State of California for the County of Riverside (Case No. RIC 1801185). Arispe is the PAGA representative plaintiff in the Arispe Lawsuit. RSWIS is sued as an alleged successor in liability to WIS. b. In the Arispe Lawsuit, Arispe asserts an unsecured claim against the Debtors for civil penalties for violations of PAGA in the amount of $60,300,000. WHEREAS, the Committee engaged in an investigation of potential claims against the Centre Lane Parties, and of the basis for and potential infirmities of each of the RSWIS Claim, the Rabbi Trust Claims, the Hose Claims, and the Arispe Claims. To resolve all potential claims against the Centre Lane Parties and to provide for a plan of liquidation that could provide meaningful recoveries for allowed creditors of the Debtors, the Committee, the Debtors, and the Centre Lane Parties have agreed to a compromise (the "Settlement") of claims. The Committee, upon the advice of its professionals, determined it appropriate to extend its good offices to the resolution of those portions of the Hose Claims, Arispe Claims, and Rabbi Trust Claims, including claims potentially able to asserted, that were not property of the Debtors' estates, insofar as the same was supportive of a global resolution benefiting all holders of allowed claims against the Debtors. WHEREAS, RSWIS estimates based on certain arbitration petitions filed by Hose Plaintiffs that approximately one-third (1/3) of Hose Plaintiffs were employed by RSWIS and that RSWIS would be the employer for payroll tax purposes for any wages attributable to the actual period of employment by RSWIS for those Hose Plaintiffs. 4 182957\00001\103820881.v4 6 THEREFORE, in consideration of the facts, releases, and promises contained herein, and for other good and valuable consideration, including as described in this Settlement Agreement, the sufficiency and receipt of which is acknowledged by each Party hereto, the Parties promise and agree as follows: DEFINITIONS The following definitions are applicable to this Settlement Agreement. Definitions contained elsewhere in this Settlement Agreement will also be effective. 1. "Arispe Aggrieved Employees" means any individual employed by Washington Inventory Services, Inc. as a non-exempt hourly employee in California and who received at least one wage statement during the Arispe Recovery and Release Period. 2. "Arispe Attorneys' Fees and Costs Award" means the amount of attorneys' fees and costs that the Court awards and/or approves to be paid to Arispe Counsel in the Arispe Lawsuit. 3. "Arispe Class Representative Service Award" shall have the meaning ascribed in section 12. 4. "Arispe Counsel" means Capstone Law APC. 5. "Arispe Gross Settlement Amount" shall have the meaning ascribed in section 8. 6. "Arispe Individual Settlement Payment" means an Arispe Aggrieved Employee's share of the Arispe Net Settlement Amount. 7. "Arispe Lawsuit" means the action captioned Arispe v. Washington Inventory Services, Inc., et al., RIC 1801185 (California Superior Court, County of Riverside). 8. "Arispe Net Settlement Amount" means the Arispe Total Settlement Amount minus deductions for the Arispe Class Representative Service Award, the Arispe Attorneys' Fees and Costs Award, and the Settlement Administration Costs allocated to the Arispe Lawsuit. 9. "Arispe Pay Period" means a regular pay period during which an Arispe Aggrieved Employee worked for one or more Defendants as an inventory associate during the 5 182957\00001\103820881.v4 6 Arispe Recovery and Release Period, and received a paycheck, as calculated by the Settlement Administrator and rounded up to the nearest whole number. 10. "Arispe Recovery and Release Period" means the period from January 17, 2017 through June 8, 2017. 11. "Arispe Representative Plaintiff" refers to Monica Arispe. 12. "Arispe Total Settlement Amount" means $450,000 of the total Gross Settlement Amount allocated to the Arispe Lawsuit. 13. "Attorneys' Fees and Costs" means, together, the Arispe Attorneys' Fees and Costs Award and the Hose Attorneys' Fees and Costs Award. 14. "Bankruptcy Court" means the United States Bankruptcy Court for the District of Delaware. 15. "Centre Lane Parties" means any and all of the following, whether individually or collectively: RSWIS, Centre Lane Partners LLC, CLP Retail Services Holdings LLC, Centre Lane Partners IV L.P., CLP Retail Services Co-Investment, LLC, and any subsidiary, parent, successor or related entities. 16. "Claims Deadline" means the deadline by which Hose Plaintiffs must postmark to the Settlement Administrator any claim to receive a share of the Hose Net Settlement Fund (Individual Settlement Payment). The Claims Deadline will be sixty (60) calendar days from the initial mailing of the Notice of Collective Action Settlement by the Settlement Administrator, unless the 60th day falls on a Sunday or Federal holiday, in which case the Claims Deadline will be extended to the next day on which the U.S. Postal Service is open. Hose Plaintiffs who are entitled to a Hose Individual Settlement Payment but who, for no fault of their own, were not identified or located before the Notice of Class Action Settlement and/or the initial Distribution of Hose Individual Settlement Payments may request payments from the Reserve Fund up until the date of the final payment from the Centre Lane Parties, scheduled for December 1, 2021, as set forth in Terms of Settlement Paragraph 34 below. 6 182957\00001\103820881.v4 6 17. "Class Representative Service Awards" means, together, the Arispe Class Representative